Oh, and I also forgot, very often I hear the question – What portfolio is considered optimal?
There is no universal answer here. Each investor makes his own requirements for the portfolio, which depend on his goals and investment horizon. But we can talk about a well-balanced portfolio – it is obtained with properly organized diversification, when the risk and return indicators of the assets from this portfolio will suit the investor as much as possible. At the same time, each investor’s willingness to take risks and the size of the expected return may be different.
Let’s take a very hypothetical example. A conservative investor wants, first of all, to preserve his investments and protect them from inflation, so in his case, diversification will consist in choosing the most reliable bonds and shares of several large and stable companies.
A moderate investor is ready to make risky investments for the sake of potential additional income, but his main goal is to accumulate capital over a horizon of 15-20 years (about this read more as I wrote on specialized websites on finance). Therefore, he can build his portfolio of stocks of a wide market, where companies from almost all sectors of the economy are represented.